Headline writers are warning of a junk bond apocalypse. The articles warn that this is bad news for stocks. Many analysts believe bond traders are smarter than stock market traders. Bonds require more math to understand, and the logic is that only smart traders work in that market. Since bond traders are smart, the theory says, they stay one step ahead of the stock market. A breakdown in bonds is a warning sign for stocks. And bond breakdowns should start in the weakest sector, which is junk bonds. So, when junk bonds sold off last week, the message was clear — the bear market in stocks is inevitable. The problem is, that’s wrong. The cha...
Trading Strategy Patti Domm in CNBC believes that stocks have a good chance of trading higher in the week ahead, if the typical Thanksgiving holiday week trading patterns take over. The S&P 500 has averaged a gain of 0.6 percent during Thanksgiving week, and has been higher 75 percent of the time since 1945. In the years when the market is already up 10 percent or more, Thanksgiving week was even stronger — gaining nearly 0.8 percent on average, according to Bespoke. Last week we wrote “…Money managers continue to sit on more cash than they have in a very long time. As earnings season progresses investors are ‘selling the newsâ...
GBP/USD remains bid coming into the last full-week of November, and the pair appears to be on track to test the monthly-high (1.3321) as it extends the bullish sequence from the previous week. It stands to be an eventful week for the British Pound as Chancellor of the Exchequer Philip Hammond is scheduled to present the updated U.K. budget later this week, but the Parliament testimony with Bank of England (BoE) officials Jon Cunliffe, Ian McCafferty, Michael Saunders and Gertjan Vlieghe may heavily impact the near-term outlook for GBP/USD as the central bank appears to be on course to further normalize monetary policy in 2018. Despi...
The dominant chart construction in Gold continues to be the possibility of an inverted H&S bottom pattern on the weekly and monthly graphs. Note: Some of you might have read that Ray Dalio (Bridgewater) is accumulating a sizable position in GLD. I believe Dalio will be right, but that he is early. See http://www.zerohedge.com/news/2017-11-13/ray-dalio-goes-gold-buying-spree-adds-575-gld-http://www.zerohedge.com/news/2017-11-13/ray-dalio-goes-gold-buying-spree-adds-575-gld-  I have written extensively about the possibility of a Q1 low at or just above 1200. The daily chart displays a possible continuation descending triangle. Depending...
The International Energy Agency projects that the U.S. is set to become the world’s leading oil and natural gas production superpower. Is that realistic? Last week I had articles published in both Forbes and the Wall Street Journal (WSJ) addressing a recent report from the International Energy Agency (IEA). The IEA made headlines when it projected in its World Energy Outlook 2017 that the U.S. would be a net exporter of oil within a decade. The IEA also projected that the U.S. is set to become the world’s dominant oil and gas production leader for decades. In a pair of articles that risk making peak oilers’ heads explode, I argued that...
Talks to forge a new coalition government in Germany passed the self-imposed deadline at the end last week, and the markets paid little attention. The euro finished last week a little below $1.18, up to a little over 1% on the week. Talks continued over the weekend and then, late yesterday, the pro-business Free Democrats, with a dramatic flair, walked out of the negotiations. The CDU/CSU and Greens were surprised as the FDP appeared to get much of what it had wanted.  We had suggested earlier that Merkel and the CDU/CSU were willing to concede the much desired financial minister to the FDP. In such a situation, the international resp...
The SIMPLE Plan is a type of retirement account for small businesses that is simpler (ah hah!) to administer and more portable than the 401(k) plans that are more appropriate for larger businesses. SIMPLE is an acronym (probably a backronym, more likely) which stands for Savings Incentive Match PLan for Employees. Photo by Thomas Hill A SIMPLE typically is based on an IRA-type account but could be based on a 401(k) plan. What we’ll cover here is the IRA-type of SIMPLE plan.  The difference (with the 401(k)-type) is that there are more restrictions on employer activities, and less room for error (as can be the case with 401(k) plans). A SI...
The holiday season is kicking off this week with Thanksgiving Day and Black Friday in the spotlight. And retailers have a tradition of tapping this fervor the most as about 25-40% of sales comes during the holiday season. In fact, retailers have been the clear outperformers in the stock market in the week leading to Black Friday and in the days thereafter. Per Kensho, a group of S&P 500 retail stocks, on average, has generated 5% returns in the period spanning one week before to one week after Black Friday since 2007. This is compares favorably with average returns of 3% for the S&P 500 and 4.5% for consumer discretionary stocks. T...
Having first surged above $8000 overnight amid Zimbabwe’s chaos, it appears uncertainty in the core of Europe has driven further demand for cryptocurrency protection, sending Bitcoin to a new record high of $8247 – up 50% from the ‘Bitcoin Cash’ crash weekend lows. image courtesy of CoinTelegraph image courtesy of CoinTelegraph, the latest milestone for Bitcoin, which came following news the first Bitcoin-to-Litecoin Lightning Network ‘atomic swap’ successfully debuted, caps its comeback after Bitcoin Cash volatility. BTC currently has a market cap of almost $134 bln against a cross-crypto combined cap of jus...
One of the largest questions that faces investor is what asset classes to invest in. The two largest are stocks (equities) and bonds (fixed income). How can an investor know which asset class to invest in, or what proportions should be used in a mixed strategy? It all comes down to your fundamental investment goals. We believe the goal of any investor should be either: Maximize returns given a fixed level of risk Minimize risk given a fixed level of desired returns Incorporating both return and risk into an investment strategy can be difficult. While performance is easy to measure, risk can be more difficult to quantify. After all, how do w...